Saturday, May 7, 2011

The Speenhamland System

The Speenhamland System was one of a number of Poor Laws in England in the late 18th and early 19th century. The background is complex. Here is a short description.

It appears that real wages for farm laborers were falling, especially in the South and East of England, but migration opportunities to London were growing. There were several types of poor laws, but the Speenhamland System was interesting in that it appears that local governments and churches (it's not exactly clear to me where the lines of authority were drawn in the "parish") agreed upon what we might call a “living wage,” with the parishes paying for the gap between actual wages and the living wage. Several great economists including Mark Blaug and D. McCloskey have reconsidered the 19th century view that lax administration made the system a failure. Most of what I’m writing from here is based upon George R. Boyer, “The Old Poor Law and the Agricultural Labor Market in Southern England: An Empirical Analysis,” Journal of Economic History 46:113-135 (1986).

Apparently, that a rapid rise in relief payments burdened the parishes is taken as a given by just about everyone, even among economists on opposite sides of other issues regarding the laws. One of the intense debates over the past several decades is whether it was the Speenhamland System that caused this increase either through an increase in voluntary unemployment and/or a reduction in wages. McCloskey argued that economic theory would support the former conclusion but not the latter. Boyer quotes McCloskey (Explorations in Economic History [1973]) as saying that the system “was generally administered as an income subsidy ‘with a 100 percent marginal tax rate on earned income below the minimum’.” Boyer appears to argue a public choice view of the system. In areas with concentrated political power for landowners the Speenhamland system shifted the expense of paying wages that were high enough to keep laborers from moving to London from the farmers to everyone else in the parish.

What do Boyer’s numbers tell us? There is strong support for his public choice argument about the powerful landowners. But, the results on the issue as the whether the Speenhamland System created voluntary unemployment are irritatingly mixed. Per capita relief expenditures had a small but statistically significant negative effect on laborers’ income. On the other hand, the Speenhamland system of wage supplements was indeed measured to increase unemployment, but the result was not statistically significantly different from zero. (British analysts contemporary to the period believed that the system did lead to voluntary unemployment.)

What is most interesting to me in Boyer’s analysis is his reaction to the somewhat muddy results of the relationship between the Speenhamland System and the idea of voluntary unemployment. Boyer says that the results “provide tentative support for the revisionist hypothesis that rural parishes were selective in their granting of relief to able-bodied laborers.” (My emphasis.) The idea that decentralized religious institutions in the 19th century could minimize unhelpful effects of compassionate relief by being selective and discerning in their application has been a central argument of Marvin Olasky for years.

No comments: